Commentary: Irreconcilable Differences in Single Payer Promises (December, 2013)

By Rob RoperRob Roper

Three years after the passage of Act 48, the law that is supposed to bring single payer healthcare to Vermont, nobody knows exactly what we’re getting ourselves into. Promises have been made to different parties with different interests that, now that the rubber is nearing the road, appear to be irreconcilable.

Perhaps the most significant promise made in regard to Green Mountain Care (GMC), as the single payer system will be known, is that it will save money — or, at least “bend the cost curve” from where we are now – through greater efficiency.

For businesses, Governor Shumlin has promised repeatedly that enacting single payer will be a positive economic driver for Vermont. It will achieve this by “tak[ing] the burden of providing health insurance off the backs of small businesses,” allowing them to instead “invest in job growth and innovation.”

Senior citizens, veterans and federal employees have been promised that their Medicare, Tricare and government insurance will remain unchanged. Teachers and state employees are adamant that their coverage won’t be diminished.

Single payer activists, “true believers,” have been promised that Green Mountain Care will be a clean, government-run single payer system marking a time when healthcare becomes a “human right” — which many take to mean unfettered and unlimited access to any and all medical care.

But “free” unlimited access to care, benefits packages on par with teachers and state employees, and bending the curve of healthcare spending to spur economic growth are promises at tension with one another. So are the concepts of a true (and theoretically more cost effective) single payer system with one that leaves in place Medicare, Tricare, and other federal plans, not to mention the need to service non-Vermont-resident private insurance, and resident-owned supplemental insurance policies.

So, what is the real deal?

Senator Peter Galbraith put forward a funding proposal for GMC that would raise $1.6 billion through an 11% payroll tax on employers, a 2% payroll tax on employees, and a 10% tax on non-wage income, all subject to income level caps the same as those that currently apply to Social Security taxes. If the cost of GMC turns out to be higher than expected ( two independent studies say it will cost between $1.9 and $2.2 billion, and the Administration has already upped its cost estimates to

cost projections to between $1.78 billion and $2.18 billion

) Galbraith says we can just ratchet up the rate.

But, a 13% payroll tax breaks the promise to businesses that GMC will take the burden healthcare off of their backs. This is Galbraith’s intention. “For those companies, it’s a cost transfer,” he says. “That is to say they no longer pay the premiums but they pay the payroll tax.”
 In practice, a payroll tax would more firmly affix the burden of providing healthcare onto the backs of businesses as a tax is less flexible than a premium. You can’t decide to drop a tax, or choose a different tax plan, and tax laws come with criminal penalties.

As for bending the cost curve, the governor stated back in 2012, “My own view is that the current system that requires employers to pay 10, 11 or 12 percent payroll to cover rising cost of health insurance is too high for business.” (VPR, 7/16/12) Well, 13 percent is even higher than that, and 13 percent represents the best-case scenario for businesses. If the new taxes needed to pay for GMC come to $2.2 billion, the payroll tax would be around 16.25 percent.

And economic growth and jobs creation? Senate Finance Committee chairman, Tim Ashe, highlighted another problem, “The majority of small businesses in Vermont currently pay nothing for healthcare, because they don’t offer it…. Well, if you tell the majority of small businesses in Vermont that they’re going to go from zero percent of payroll to thirteen percent overnight, I think there might be dramatic implications throughout the economy.” (Mark Johnson Show, 1/24/14) Those dramatic implications are not likely to be the promised economic boom.

Another facet of Galbraith’s funding plan is a 10% tax on non-wage income – dividends, interest, capital gains, etc. This breaks the promise to senior citizens. Their Medicare plan may remain unchanged (though Act 48 does call for folding Medicare into GMC), but will be paying a new 10 percent tax on the first $113,000 of their social security and nest-egg income to pay for GMC. That is a significant change to someone’s finances as a result of single payer.

The people who would benefit from this funding plan would be those who have no salary and no alternative income. They would pay nothing, unless there are co-pays or deductibles associated with GMC, which is not yet clear. However, co-pays and deductibles are not what “true believer” single payer advocates understand they have been promised.

Senator Galbraith contends that, “Whatever we do… it will look substantially like this bill. Not because I’m a smart guy, but because there really is no other way to do it.” However,  there are other options for raising $1.6 billion. A progressive income tax with a low bracket of 15% and a high bracket of nearly 25% is one option. An expanded sales tax, including services, clothing, food, etc., at a rate of over 19% is another. These, of course, present serious problems of their own.

It’s clear why many advocates of GMC in the State House want to put this discussion off until after the 2014 election. It’s also clear why the public should not let them.

– Rob Roper is president of the Ethan Allen Institute. www.ethanallen.org

________________________________________________________________

Please help the Ethan Allen Institute fight for free market reforms and limited, Constitutional government. We can’t do it without your support. Thank You.

Donate Button

{ 8 comments… read them below or add one }

Mark Donka February 2, 2014 at 3:17 am

Great Article We can not let this rest until after the midterms. People need to know what the costs are associated with this. But right now the administration is not giving us a set amount. They just keep floating numbers around. As Vermonters who will be paying for this we need answers, no we demand answers. Send you Vt Representatives e-mail or call them. I have sent messages to John Campbell but he has not replied. I will continuing sending e-mail and document how they do not respond. Speak out people it is our only chance.

Reply

Ralph M McGregor February 3, 2014 at 4:13 pm

I am in my late 80’s and I have 5 children living in state but if Shumlin takes another $11,000 of my hard earned and hard saved retirement income I will reluctantly take my tax money to a friendlier state

Reply

Steve Keene February 3, 2014 at 5:00 pm

Is there a Republican counter-proposal to the health care crisis provided somewhere? Please advise. Thanks.

Reply

David Bresett February 4, 2014 at 1:09 pm

As always another critique, but no solution is offered. Ethan Allen Institute will do exactly what all rightwing think tanks do. Criticize and run away from the problem instead of figuring out a way to get healthcare to all.

Reply

Rob February 11, 2014 at 9:39 pm

There are a number of free market solutions to expand coverage, increase quality and lower the overall cost of care. Allowing people to purchase health insurance across state lines and opening up competition amongst providers, seems like a no brainer. Tort reform. Dr. William Hsiao, godfather of VT single payer, said this would save 11% of healthcare costs. (I wonder if the reason we’re not getting it is because the Speaker of the House and the Senate President Pro Tem are both trial lawyers…). Here’s a very innovative approach in the pipeline in NJ pioneered by Dr. Aleta Eck, which I wrote about here… http://vtdigger.org/2013/08/11/roper-health-care-reform-with-a-price-tag-that-wont-make-you-sick/. There are certainly more free market ideas, but this is enough to start with.

Reply

David Bresett February 25, 2014 at 1:50 pm

The “Free Market” has had health insurance for however long healthcare has been around. Seems that going back to “Free Market ” is not the way to go. Private insurance constantly raise rates to pay their bottom line, and to pay for their off sight fun and games. Healthcare insurance providers would just keep raising their rates. You have no solutions.

Reply

H. Brooke Paige March 12, 2014 at 2:57 am

Devastating Diagnosis – Green Mountain Care 2017
a prognosis by H. Brooke Paige

Vermont (January 2017) – Peter Shumlin’s socialist dreams of “universal, single payer healthcare” have mutated into a nightmare over the past five years. The utopian dream of healthcare for all was never properly explained nor fully understood by Vermonters. The working poor thought that it would be the “free care” that they saw those on welfare receiving. Most believed the promises that their healthcare providers and the level of care they were receiving would somehow continue – while the cost of care would be greatly reduced through streamlining and controls that the state and federal government would impose. Those who worked for large employers and government believed they would not be affected. None of these assumptions would prove to be correct.

Green Mountain Care (GMC) quickly acquired the resources of Vermont Blue Cross and Blue Shield (BCBS) as most of its insured became GMC clients. In the early days of the rollout, GMC and its promotional website Vermont Health Connect (VHC) failed to deliver healthcare for the small group of self-insured and the employees of small businesses targeted as the first clients of GMC. Governor Shumlin and his loyal minions on the Health Care Board, lead by a Burlington restaurateur, had no understanding of the healthcare insurance industry and were unprepared to handle even the most modest problems as they arose. While the Federal Government abandoned their hapless website contractor CGI-FEDERAL, Shumlin regrettably decided to continue with them “throwing good money after bad” eventually spending over $100 million of state and federal funds with CGI on a system that was politely described as “leaving a lot to the imagination” of the users. The plain truth was that the CGI system would never work – despite months of “tinkering” and additional monies wasted, the VHC website never reliably allowed users to: create accounts or access them, employers to edit or update their accounts (if they had been patient and creative enough to create one) nor could the system collect premiums and in the end could not pay for health care services incurred by its “insured” clients. In the end CGI was abandoned and the BCBS operating system, by default, became the GMC system.

Vermonter’s healthcare system is an unrecognizable husk of the quality network they enjoyed just a few years ago as the politician’s grand scheme, GMC, has decimated Vermont’s hospitals and healthcare practitioners – as well as the state’s economy at large. It is sad that there was no way, back in 2012, to foresee the full consequences that the progressive plans, designed by inexperienced, insistent social architects with big ideas but no understanding of the complexity of the healthcare system or the health insurance industry that financed it.

As the GMC system sputtered to life in 2014, many providers chose not to participate as a result of the anemic 105% of Medicare reimbursement rates which barely covered their out of pocket costs and failed to contribute toward overhead or capital investment costs. Within a year 20% of practicing physicians and specialist had retired, moved out-of-state or decided to limit themselves to “fee for service” patients. Nearly 50% of Vermont’s Oncologist and Cardiologist declined to participate in the GMC program. To fill the void, the Vermont Legislature hastily authorized nurse practitioners and LPNs to act as primary care providers without direct supervision.

Today, Vermonters receive their healthcare treatment and pay for services in ways unimaginable just a few years ago. For GMC participants who have their treatment denied by the GMC Review Board and those who have decided to pay the penalties instead of participating have found that many providers offer deep discounts for cash payment for services rendered. There are now many “fee for service” care facilities including: MedExpress, UrgentCare, Got-A-Doc, LabCorp, and Dynamic Therapy that offer extensive portfolios of services for walk-in patients on a first-come-first-served basis. Patients pay for services when rendered by cash or credit card with financing arrangements available for more extensive and costly procedures. While these new facilities, at first blush, seem questionable; most are staffed by highly competent and experienced practitioners (many are those that chose not to participate in GMC) and provide quality care. For those on a budget or in a hurry, Doctors on Call provides internet and phone consultations on routine and minor medical concerns, allowing many to resolve their medical issue on their own. Additionally, there are “premium” service providers like Concierge Medical which handle all the details for the medical needs of the wealthy – lining up the best doctors, treatment facilities and even arrange transportation before and after treatment, truly door-to-door service.

Possibly the most destructive aspect of the Green Mountain Care program has been the state’s scheme for financing its ever escalating costs. Governor Shumlin, for several years, obfuscated and then flatly refused to reveal the amount and sources of the funds required to finance GMC’s operation until well after his reelection in the fall of 2014. That December, the Governor finally revealed the three-pronged taxation plan required to generate the $2.9 billion necessary to fund GMC – including: 1 – a 25% payroll tax with employers paying 17.5% and employees having 7.5% deducted from their paychecks (the self-employed are required to pay the entire 25%), 2 – a 10% tax on all unearned income – capped at $200,000 per year and 3 – an increased healthcare claims tax raised from 7% to 14% – this tax, formerly paid by insurance firms, is now paid by the patients receiving the care. As soon as the Governor had announced the requirements of the “GMC taxes”, employers implemented plans to “scale back” their Vermont operations or leave the state in order to remain profitable. By summer of 2016; new layoffs in Vermont totaled over 15,000, including nearly a thousand from the healthcare industry as they scaled back in anticipation of reduced revenues from GMC.

Hospitals and medical providers, desperate for additional revenues, began to increase fees for services rendered in patient categories not covered by GMC, primarily: workman’s compensation injuries, auto accident victims and personal injuries paid for by liability insurance claims. Insurance providers immediately adjusted their rates to their insured by as much as 25%, worsening Vermont’s economic and business environment.

Vermont’s healthcare subsidies encouraged many lower wage earners to quit their jobs and sign-up for the broad spectrum of available social service benefits, since the new healthcare taxes in addition to state, federal and Social Security taxes resulted in significantly lower take home pay, insufficient to cover their living expenses.
Former Governor Shumlin had narrowly won reelection in 2014, in part because the impact of his Green Mountain Care and his ultimate prize of “single payer” were not fully understood. By 2016, Shumlin had realized that he had little chance of winning another gubernatorial race and attempted to best incumbent Senator Patrick Leahy in the Democratic Primary – failing by a wide 3:1 margin.

Ever the opportunists, Shumlin and his brother, Jeffery, refocused their Putney Travel Service to take advantage of increased interest in “medical vacations” brought on by healthcare treatment delays and denials by GMC. Putney Medical Vacations will soon provide complete packages that allow their wealthy customers to avoid the delays and the reduced quality of care in Vermont by arranging treatment “stays” in exotic venues that include: Bermuda, Costa Rica, Bangkok, Mexico and Cape Town where patients can save up to 70% under the expert care of orthopedic, oncological, plastic or general practice surgeons and enjoy recovering on the sun-soaked beaches of the treatment venue.

Governor Scott and the newly elected Republican Legislature are struggling with the consequences of GMC. Vermonters who cannot afford to avail themselves of “fee for services” treatment find long waits at the “public” hospitals – the state has been required to take over the operation of most of the formerly independent institutions, closing several smaller hospitals to control costs. Appointments for non-emergency hospital procedures now require waits of three to five months once they are approved by the GMC Board.

All of this could have been easily avoided. The initial concern over 40,000 uninsured Vermonters was discovered to be a gross exaggeration. When those who wished not to be insured (primarily the wealthy and young individuals) and those who chose to find care through social services (at the taxpayer’s expense) were eliminated from the equation , the actual number of uninsured individuals who wanted insurance coverage was less than 9,000. The biggest problem was that none of those involved in the planning of GMC had a thorough understanding of healthcare insurance or the financial tightrope that these firms walked to successfully balance the costs of care and premium rates while managing to remain financially viable. The “public financed” political/government alternative has proved to be a disaster of biblical proportions – out-of-control costs and radically insufficient care.

It is a shame that there is no way to reach back in time and inform Vermonters of the healthcare troubles in their future.

H. Brooke Paige, a historian and writer, is a resident of Washington, Vermont.

Devastating Diagnosis – Green Mountain Care 2017 as published in the WORLD, March 12, 2014

Reply

Burton Meazell November 26, 2014 at 3:17 pm

What’s up, I check your new stuff on a regular basis. Your writing style
is witty, keep it up!

Reply

Leave a Comment

Previous post:

Next post:

About Us

The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
Read more...

Latest News

Cal-Berkeley’s Free Online Courses Go Offline

by John McClaughry  The March 20 Weekly Standard had a notable article  from Andrew Ferguson. It’s about the clash of politically correct University of California-Berkeley with the equally...

Efficiency Vermont’s Inefficient Effect on Electric Rates

by Rob Roper Art Woolf has an excellent column in the Burlington Free Press on Vermont’s high electric rates. One of the many good points he makes is...

Solving the Immigrant Farm Labor Problem

by John McClaughry  Last Monday Vermont Digger published a really fine article by Jasper Craven about the problems faced by Vermont dairy farmers. The occasion was a statewide...

Charles Murray’s Moderate to Liberal Middlebury Speech

by Rob Roper Charles Murray’s aborted presentation at Middlebury College where he was violently chased from the stage has garnered much national attention. It has become the poster...

Plastic Bag Taxs: A Real Life Story

by Rob Roper The chatter in the State House seems to think that the plastic bag tax (H.105) actually has some shot at getting a real hearing this...

Video